The auto service contract glossary terms contained here are defined by how they relate to extended warranties and vehicle service agreements.
Sometimes called an “extended warranty”, a service contract is a promise to perform (or pay for) certain repairs or services. Although technically not a “warranty” as defined by federal law, service contracts may be arranged at any time and always costs extra. Warranties, on the other hand, ONLY come with a new car and are included in the original price. Vehicle service contracts are popularly referred to as “extended auto warranties” or “extended warranties”. Use of the term “extended warranty” or “warranty” on this site is intended to refer to vehicle service contracts and not manufacturer’s warranties.
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‘A’ Rated: A term often used as a rating reference (ie Standard & Poor’s “A Rated”). Many people know Standard & Poor’s as one of the world’s preeminent providers of credit ratings, and for such globally recognized financial-market indices as the S&P 500®. They also provide a wide range of other products and services designed to help individuals and institutions around the world make better-informed financial decisions with greater confidence. AON is a part of an “A Rated” global organization with a huge capital base, enabling us to provide our clients with secured products. “A Rated” is the highest rating a business can receive, however, you should not assume that every insurance provider on the AAautoProtection.com website has obtain such a rating as they can fluctuate often.
Administrator: A company that authorizes and pays the repair facility for repair work to your vehicle. The administrator works hand in hand with the repair facility to make sure your claim is handled properly.
A.M. Best & Co: A.M. Best Company is the leading source for insurance company ratings, analysis and information. It offers comprehensive, quality data on more than 6,000 insurance companies. The company was founded in 1899 and their rating system has become the industry’s standard measure of an insurance company’s financial condition. For more information go to ambest.com.
Authorization: We must give prior authorization (official approval) before repairs are started.
Cancellation: Typical cancellation clauses of an extended service contract are for the owner to receive a money back guarantee if the policy is cancelled with in the first 30 days of enrolling, if there have been no claims filed. After 30 days a cancellation can only occur in the event that the Vehicle is declared a “total loss” by an Insurance company, and then refund is usually prorated based on time and mileage that the policy was in force.
Corrosion Warranty: A corrosion warranty is a warranty from the manufacturer that covers rust and perforation on the metal body of the vehicle. Check your manufacturer’s warranty manual for the period of time that the vehicle is protected.
Deductible: The amount that you must pay the repair facility for work when vehicle is being repaired. In most cases a deductible may need to be paid for each type of mechanical break down.
Diagnostics: The exploration the repair facility administers to certain parts of your vehicle to determine the necessary repairs needed for your vehicle to be operable. You are responsible for all expenses associated with diagnosis before any repairs begin.
Eligibility: Determining if a vehicle being in certain classifications and which coverage can be applied to the vehicle. A vehicle typically must be less than 15 model years old and have less than 125,000 odometer miles to be eligible for an extended service contract. Additionally, vehicles with less than 50,000 miles and less than 5 years old are eligible for more comprehensive coverage than may be available to older more driven vehicles.
Extended Service Contract: A policy, which protects the automobile owner or lessee against mechanical failures and breakdowns. It can also be termed Vehicle Service Agreement or Extended Service Agreement. This service contract will pay for your vehicle’s covered repairs after the manufacturer’s warranty has expired.
Exclusionary Policy: The most comprehensive extended service contract available. It is typically referred to as a “bumper to bumper” policy. This particular policy lists components of your vehicle that are not covered under the service contract. If a part or component is not listed, then it is covered under an exclusionary policy.
Grace Period: A grace period is a certain number of days and miles that must expire before the first claim can me made. A grace period is mainly for confirmation that the vehicle registered does not have any pre existing conditions and the purchaser of the policy is not attempting any type of insurance fraud.
Inclusionary Policy: or also called “Stated Component Coverage” Policies that list the components and parts that are covered by the extended service contract. If the component or part is not listed, then it is not covered.
In-Service Date: The date the Vehicle was purchased by the original owner and driven or the date the Vehicle was placed in use for rental, demonstration or other purposes.
Inspection: The examination or review of your vehicle’s components by a certified mechanic. A vehicle will pass a pre-service contract inspection only after the mechanic attests to the proper working condition of all components of your vehicle.
Insurance Company: The insurance company that issues an insurance policy and guarantees the obligations of the administrator.
Insurer: Most reputable auto service contract companies contract with another company to insure their obligations for a service contract. For example, if a service contract company ran into financial difficulties and failed to meet their obligations under the service contract, the insurer could step in to pay the claims. As the exact arrangement between the service contract company, the insurer, and any re-insurers varies from company to company, always read your contract carefully.
Make: The Make of your vehicle is the same company that manufactured your vehicle.
Manufacturer: The manufacturer is the company that built your vehicle.
Manufacturer’s Recommended Maintenance Guidelines: This is the routine maintenance that is recommended by the manufacturer of your vehicle to keep the vehicle in satisfactory working order. Typical guidelines to be followed include: changing the engine oil, checking proper fluid levels, tire rotations, wheel alignments. Not following the recommend maintenance guidelines may void your service contract please keep all records of such repairs.
Manufacturer’s Warranty: This is the promise of your vehicle’s manufacturer to repair your vehicle for a specified period of time and/or mileage. All factory-installed parts are covered against defects and workmanship. Typical manufacturer warranties are 3 years or 36,000 miles or 4 years or 50,000 miles. Check your manufacturer’s warranty manual for warranty information.
Model: The model is the type of vehicle that was made by the manufacturer.
New Vehicle: When discussing extended service contracts, the term new vehicle means an automobile that is still covered by the original manufacturer’s “Bumper To Bumper” warranty. Not just the manufacturer power train warranty.
Odometer Miles: The actual total miles the Vehicle has traveled as viewed on the odometer. This is the mileage stated on the odometer. Failure of the odometer or removal will void the service contract. Unless the change of the new working odometer has been documented to the service contract company.
Plan Term: The amount of time in years or the total mileage that your extended service contract policy will protect your vehicle.
Plan Expiration: This is the date or odometer mileage that policy will no longer be in effect. For example, a 5 year / 100,000 mile extended service contract, will expire 5 years from the date that you enroll your vehicle or when the odometer reads 100,000 miles.
Power Train Coverage: A limited service contract from the Service Contract Company that covers certain parts of your vehicles engine, transmission and drive train assembly. If any of these components fail while the vehicle is covered under the powertrains service contract, the service contract is responsible for the repair.
Product Warranty: Product Warranties are stated component plans that are associated with particular products that come with the plan. That is, These products can include an oil, tablets, and battery contact protectors. The products are intended to protect the parts of the vehicle targeted by the products, and to reduce the likelihood of a breakdown or failure.
Ratings: Check out the A.M. Best’s rating for insurers and re-insurers. A.M. Best’s ratings are widely recognized as the benchmark for determining an institution’s financial strength.
Reinsurance Company: The insurance company that issues an insurance policy and guarantees the obligations of the insurance company. A reinsurance company is required only when a Risk Retention Group insures your vehicle service contract.
Re-insurer: Reinsurance is an arrangement between 2 or more insurance companies to spread out the risk of an insurance contract. This is done so that an unusually large loss from a policy does not fall on a single company. The exact arrangement between the service contract company, the insurer, and any re-insurers varies from company to company, so always read your contract carefully.
Repair Facility: An authorized licensed repair facility located in the United States or Canada. This includes, but is not limited to your dealership, local mechanical facility or national repair facilities.
Rental Benefit: The amount you will be reimbursed for actual expenses incurred for substitute transportation while your vehicle is being repaired. In the event that a mechanical breakdown of a covered component requires labor in excess of 8 hours, you are reimbursed up to $25.00 per day maximum 4 days. Exclusions are delays caused by unavailability of parts, shipping, or shop schedules.
Roadside Assistance: A program that provides you with a toll-free telephone number to call 24 hours a day 365 days a year. This is for assistance when your vehicle breaks down or when there is a vehicle emergency (towing, battery assistance, flat tire assistance, emergency lock out, or fuel, oil, fluid and water delivery)
Service Contract: A vehicle service contract is a legally-binding compact in which one party agrees to pay for the approved vehicle repairs of the other party, in return for a set payment. Service contracts of all kinds are commonly called “extended warranties” because, in many cases, the coverage is similar to the original warranty offered by the manufacturer. However, levels of coverage can vary. (Compare to “Warranty”)
Standard & Poor’s: Is one of the world’s preeminent providers of credit ratings, and for such globally recognized financial-market indices as the S&P 500®. But that’s only part of the picture. They also provide a wide range of other products and services designed to help individuals and institutions around the world make better-informed financial decisions with greater confidence. S&P Search allows you to search for current S&P rating information of any Insurance Provider.
Stated Component Coverage: A policy that lists all the components and parts that are covered by the extended service contract. If the component or part is not listed, then it is not covered. And if a component is listed on the contract they are covered.
Transferability: A vehicle having an extended service contract can have the service contract transferred to the new owner of the vehicle if the vehicle is sold privately.
Used Vehicle: When discussing extended service contracts, the term used vehicle means an automobile whose original manufacturer’s warranty has expired. This term has nothing to do with ownership of a vehicle.
Validation Period: A validation period is a certain number of days and miles that must expire before the first claim can me made. A validation period is mainly for confirmation that the vehicle registered does not have any pre existing conditions and the purchaser of the policy is not attempting any type of insurance fraud.
Vehicle Identification Number (VIN): Your Vehicle Identification Number (VIN) is a 17 digit alphanumeric series, which describes the characteristics of your vehicle. Each vehicle has a unique number. It is located in several places. The most common are:
1. On the title to your vehicle
2. On your insurance card
3. On your registration card
4. On the driver-side dashboard of your vehicle.
Vehicle Service Contract: A vehicle service contract is a legally-binding compact in which one party agrees to pay for the approved vehicle repairs of the other party, in return for a set payment. Service contracts of all kinds are commonly called “extended warranties” because, in many cases, the coverage is similar to the original warranty offered by the manufacturer. However, levels of coverage can vary. (Compare to “Warranty”)
Warranty: A warranty is a promise by a manufacturer of a given product to repair or replace the product within a specified time period, and according to specific terms and conditions. A warranty cannot be offered on a product by an entity other than the manufacture. (Compare to “Vehicle Service Contract”)
Wear and Tear: When a part or component has failed because it can no longer perform the function for which it was designed solely because of its condition. When the part has worn beyond the manufacturer’s tolerances allowed for that particular vehicle at the mileage when the problem occurs, if it has received manufacturer’s recommended maintenance. It is very important to understand the difference between “wear and tear” items and parts that are considered normal maintenance that can wear out. Normal maintenance items that usually wear out are typically not covered under an extended service contract program. Some examples of parts that wear out that are not covered are brake pads and rotors, brake shoes and drums, and manual clutches.